ARE&M - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 3.6
| Stock Code | ARE&M | Market Cap | 16,177 Cr. | Current Price | 885 ₹ | High / Low | 1,109 ₹ |
| Stock P/E | 20.0 | Book Value | 425 ₹ | Dividend Yield | 1.19 % | ROCE | 16.8 % |
| ROE | 12.3 % | Face Value | 1.00 ₹ | DMA 50 | 896 ₹ | DMA 200 | 974 ₹ |
| Chg in FII Hold | -0.60 % | Chg in DII Hold | 0.88 % | PAT Qtr | 212 Cr. | PAT Prev Qtr | 194 Cr. |
| RSI | 54.7 | MACD | -19.3 | Volume | 7,70,218 | Avg Vol 1Wk | 4,62,823 |
| Low price | 805 ₹ | High price | 1,109 ₹ | PEG Ratio | 1.01 | Debt to equity | 0.04 |
| 52w Index | 26.4 % | Qtr Profit Var | -12.1 % | EPS | 53.3 ₹ | Industry PE | 28.7 |
📊 Analysis: ARE&M shows decent fundamentals with ROE at 12.3% and ROCE at 16.8%, reflecting moderate capital efficiency. Debt-to-equity is very low at 0.04, ensuring financial stability. EPS of ₹53.3 supports profitability, and dividend yield of 1.19% adds modest income potential. The P/E of 20.0 is below the industry average of 28.7, suggesting fair valuation. The PEG ratio of 1.01 indicates balanced valuation relative to growth. Technicals show weakness: MACD negative (-19.3), RSI neutral (54.7), and price below DMA 200, signaling consolidation. Quarterly PAT growth slowed (-12.1%), raising caution, but overall fundamentals remain stable.
💡 Entry Price Zone: Ideal accumulation range is between ₹820 – ₹860, closer to the 52-week low, offering better valuation comfort.
⏳ Exit / Holding Strategy: Long-term investors (3–5 years) can hold given stable ROE/ROCE and fair valuation. Exit or partial profit booking should be considered near ₹1,050–₹1,100 resistance levels if earnings growth does not accelerate.
Positive ✅
- Low debt-to-equity (0.04) ensures financial stability.
- P/E of 20.0 is below industry average (28.7), suggesting fair valuation.
- Dividend yield of 1.19% provides modest income support.
- DII holdings increased by 0.88%, reflecting domestic institutional confidence.
- EPS of ₹53.3 supports profitability.
Limitation ⚠️
- ROE (12.3%) and ROCE (16.8%) are moderate, not very strong.
- Quarterly PAT declined (-12.1%), raising concerns about earnings momentum.
- Weak technicals: MACD negative, price below DMA 200.
- FII holdings decreased (-0.60%), showing reduced foreign investor confidence.
Company Negative News 📉
- Recent quarterly profit decline (-12.1%) indicates short-term weakness.
Company Positive News 📈
- Stable fundamentals with low debt and fair valuation.
- EPS of ₹53.3 highlights profitability.
- DII confidence increased with higher holdings.
Industry 🌐
- Industry P/E at 28.7 indicates moderate valuation levels.
- Renewable energy and engineering sector benefits from long-term demand and government initiatives.
Conclusion 📝
ARE&M is a moderately attractive stock with low debt, fair valuation, and stable profitability. While earnings momentum has slowed and technicals are weak, long-term investors can accumulate near ₹820–₹860 for better risk-reward. Existing holders should maintain a 3–5 year horizon, with partial profit booking near ₹1,050–₹1,100 resistance levels if earnings growth does not improve.